May 17, 2019 (LBO) – Sri Lanka’s economic growth is projected to recover to 3.6 percent in 2019, and gradually reach 5 percent over the medium-term, with inflation in the mid-single digits, the IMF staff appraisal revealed.
Inflation is expected to rise to 4.5 percent by end-2019, as economic activity recovers and food prices stabilize, following weather-related supply disruptions in 2018.
“The economy is expected to recover gradually in 2019,” the IMF staff report said.
“Nevertheless, important downside risks remain, stemming from a tightening of global financial conditions and weaker external demand, as well as domestic uncertainty after the recent terrorist attacks and in the run up to the elections.
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The current account deficit is projected to narrow to 2.8 percent of GDP in 2019, driven by export growth, supported by the exchange rate correction and recently-signed free trade agreements, and lower oil prices.
Sri Lanka requested a one-year extension of the EFF arrangement, with rephasing of purchases, to allow more time for the completion of the economic reform agenda and provide a strong policy anchor in the run up to the presidential and parliamentary elections in late 2019 and mid-2020.